Car to house value ratio

[Twin_Cam_Turbo]

All four of my vehicles combined are about 14.4% of my home value. Not bad considering it’s not an expensive home.

[bjstare]

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Honestly, when I see a nice car in front of a mediocre house, I assume that person is relatively decent with money (ie - living below their means re: house so they could have the toy) and give them the benefit of the doubt.

I'm usually proven wrong, but not always.

You’re a better man than me. I assume those people are the type that negotiate car purchase by payment amount.

[A790]

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You’re a better man than me. I assume those people are the type that negotiate car purchase by payment amount.

A guy two doors down from me has a 100k Porsche in the single-car garage of his paid-off half-duplex.

[JRSC00LUDE]

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I spent more at Tiffany than I did on my car. Did I fuck up?

That's likely the single biggest fuck-up I've read about on this Forum. I appreciate the brass of owning up to it.

[Tik-Tok]

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All four of my vehicles combined are about 14.4% of my home value. Not bad considering it’s not an expensive home.

18.8% face value for me. Actual equity value though is 25.7% (we outright own 3 of 4 vehicles, but only approx. half our house)

[98brg2d]

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You’re a better man than me. I assume those people are the type that negotiate car purchase by payment amount.

Yeah, I take this as a sign that somebody has poor spending habits. Sinking piles of money into a liability/depreciating "asset" generally isn't too smart. Maybe this is the "balance" OP was discussing, live like a poor person so you can drive a Huracan. Ideally, I'd have no money tied up in personal-use vehicles at all (can't deny that some vehicles are relatively safe investments), relatively little money tied up in my primary residence (compared to average) and be able to weather any financial storm and retire at an early age, spending my money on activities, not possessions, that enrich my life.

The exception is single people, that can live in a house/condo well below average price for a "family" and easily afford nice cars. That is not a bad way to go, if you aren't sacrificing good investments for bad.

I think I'm pretty close to achieving my ideal situation with respect to cars. My ratio is 2.3%.

[JRSC00LUDE]

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Yeah, I take this as a sign that somebody has poor spending habits. Sinking piles of money into a liability/depreciating "asset" generally isn't too smart. Maybe this is the "balance" OP was discussing, live like a poor person so you can drive a Huracan..

By sinking piles of money into depreciating assets do you mean like the down payments/mtg payments on all those homes in Calgary that aren't worth what anyone paid for them now?

I fail to understand the logic behind a modest home and an immodest enjoyable toy being indicative of poor spending habits. People have different priorities.

[A790]

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I fail to understand the logic behind a modest home and an immodest enjoyable toy being indicative of poor spending habits. People have different priorities.

Kind of my thinking and why I give people the benefit of the doubt.

[max_boost]

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That's likely the single biggest fuck-up I've read about on this Forum. I appreciate the brass of owning up to it.

Life is all about highs and lows bro

[The_Rural_Juror]

Tiffany appears to be a popular name for exotic dancers.

[98brg2d]

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By sinking piles of money into depreciating assets do you mean like the down payments/mtg payments on all those homes in Calgary that aren't worth what anyone paid for them now?

I fail to understand the logic behind a modest home and an immodest enjoyable toy being indicative of poor spending habits. People have different priorities.

To your first point, yes, hence my comment that ideally I wouldn't have much money tied up in my principal residence (but much more than tied up in vehicles), this can be mitigated somewhat by buying on the lower end of the range. To your second point, there isn't necessarily good logic to support, just experience knowing people that spend far more money on cars than they should leading to my personal bias when I see a nice car outside a less nice house. There are obviously specifics about each case that I don't and can't know, it is just my general perception. You maybe also missed my last sentence about a very reasonable situation that can lead to this (single people), which is just one example of an exception to my perception.

[JRSC00LUDE]

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To your first point, yes, hence my comment that ideally I wouldn't have much money tied up in my principal residence (but much more than tied up in vehicles), this can be mitigated somewhat by buying on the lower end of the range. To your second point, there isn't necessarily good logic to support, just experience knowing people that spend far more money on cars than they should leading to my personal bias when I see a nice car outside a less nice house. There are obviously specifics about each case that I don't and can't know, it is just my general perception. You maybe also missed my last sentence about a very reasonable situation that can lead to this (single people), which is just one example of an exception to my perception.

It's the new world, I respond to the words I want to and ignore the rest of the context and/or supporting arguments or "facts".

[Nakadah]

You guys have taken quite an interest in my theory and perhaps it would have been better if I shared less, however, allow me to expand a little on what I said. There has been an increase in home valuations in Canada for some time which has let to the increase indebtedness of Canadians and an increase in the cost of living. Different cities in Canada have been affected differently as pointed earlier - i.e. Vancouver vs. Calgary vs. Toronto. I should believe that we all agree that having a home is a requirement in one's life and it is the foundation which is required for one to take their life further. In Calgary's case let's say that the average asking price of a house is ~$500k and the average before tax individual income is ~$50k. Due to the high valuations of homes the vast majority of one's income goes into covering home associated costs/expenses which include more than just mortgage - i.e. property tax, maintenance, repairs, etc. After all home and food expenses/costs do you have some discretionary income which you can spend in whatever way you like - i.e. cars, jewelry, vacations, hobbies, etc... The argument that I make is that because so much of one's income goes into covering home costs one is left with very little discretionary income and hence has no choice, but to drive a 12 year old corolla. I completely understand that not everyone cares about cars, but I believe that if given the choice people will chose to drive something that is newer and more comfortable. I chose the ratio of home values to car values because for many people their car is their second most expensive purchase. I certainly would not expect to see someone with a $40k watch driving a 20 year old Rav4. We can expand on this a little and make an argument that as a result of what is considered normal the speed at which money changes hands slows - i.e. velocity of money. The effects of this will manifest in lower foot traffic in stores/establishments which will manifest in a contraction in the aggregate economy. If you want more craziness you could link the velocity of money in an economy to the country's fiscal and monetary policies, but this is not for me.

If an average home is the foundation required for individuals to step on than a 7 figure home is an aspirational home which few have the opportunity to live in. If one is able to afford to live in such a home than I believe that they should be able to afford more in all other areas in their life -i.e. go to nicer restaurants, go to nicer vacations, be better dressed, and in this case drive an exotic. I know that Shakalaka has an Aston Martin, but my argument is that I would not be surprised to see a Huracan in his garage.

The exact ratio is not important and what your ratio is isn't relevant either, however 1 to 100 is a stark contrast which in my opinion should not exist. In here I attack the valuation of an average home and argue that it should not be $500k. As pointed earlier, in Toronto and Vancouver my theory paints an even starker contrast and people there in general have a lower quality of life than Albertans. Recent statistics showed that nearly 50% of Canadians have no savings and that a further 25% will have difficulties with covering an emergency cost of $500. At some point I read somewhere that ~12-14% of mortgages in Canada have been deferred during the pandemic, which supports the idea that Canadians have little in savings. 12-14% is the equivalent of 1 in 7.

To those that will argue that home values never go down I will ask them to look up recent examples in the USA, Spain or Ireland. This has also happened in Canada both in Calgary and in Toronto more than 30 years ago. You can make the argument that the lot on which a home is built does not depreciate, however the building itself does amortize and so does the infrastructure in the neighborhood. You don't want to drive on streets that are full of potholes, do you? Communities also change and what might have been a desirable community quickly could become the opposite - i.e. a garbage processing facility built in there. This also applies to cities, provinces and countries. History is no prediction for the future.

What I am saying does not apply to the margins, but rather ~1 st. dev. from the mean.

[killramos]

If I didn’t know better, I’d swear Nakaderp is mad we called him stupid.

[finboy]

Woohoo, 5% for my wife and My car combined

[ExtraSlow]

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Woohoo, 5% for my wife and My car combined

[BerserkerCatSplat]

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Woohoo, 5% for my wife and My car combined

Haha, that made me curious so I ran the numbers and it's 3.5% for all 3 of our vehicles combined. Ballerrrrrr

[ExtraSlow]

I am certain I know people who owe more on thier cars than they OWN in thier house. Now that's a great ratio.

[Buster]

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You guys have taken quite an interest in my theory and perhaps it would have been better if I shared less, however, allow me to expand a little on what I said. There has been an increase in home valuations in Canada for some time which has let to the increase indebtedness of Canadians and an increase in the cost of living. Different cities in Canada have been affected differently as pointed earlier - i.e. Vancouver vs. Calgary vs. Toronto. I should believe that we all agree that having a home is a requirement in one's life and it is the foundation which is required for one to take their life further. In Calgary's case let's say that the average asking price of a house is ~$500k and the average before tax individual income is ~$50k. Due to the high valuations of homes the vast majority of one's income goes into covering home associated costs/expenses which include more than just mortgage - i.e. property tax, maintenance, repairs, etc. After all home and food expenses/costs do you have some discretionary income which you can spend in whatever way you like - i.e. cars, jewelry, vacations, hobbies, etc... The argument that I make is that because so much of one's income goes into covering home costs one is left with very little discretionary income and hence has no choice, but to drive a 12 year old corolla. I completely understand that not everyone cares about cars, but I believe that if given the choice people will chose to drive something that is newer and more comfortable. I chose the ratio of home values to car values because for many people their car is their second most expensive purchase. I certainly would not expect to see someone with a $40k watch driving a 20 year old Rav4. We can expand on this a little and make an argument that as a result of what is considered normal the speed at which money changes hands slows - i.e. velocity of money. The effects of this will manifest in lower foot traffic in stores/establishments which will manifest in a contraction in the aggregate economy. If you want more craziness you could link the velocity of money in an economy to the country's fiscal and monetary policies, but this is not for me.

If an average home is the foundation required for individuals to step on than a 7 figure home is an aspirational home which few have the opportunity to live in. If one is able to afford to live in such a home than I believe that they should be able to afford more in all other areas in their life -i.e. go to nicer restaurants, go to nicer vacations, be better dressed, and in this case drive an exotic. I know that Shakalaka has an Aston Martin, but my argument is that I would not be surprised to see a Huracan in his garage.

The exact ratio is not important and what your ratio is isn't relevant either, however 1 to 100 is a stark contrast which in my opinion should not exist. In here I attack the valuation of an average home and argue that it should not be $500k. As pointed earlier, in Toronto and Vancouver my theory paints an even starker contrast and people there in general have a lower quality of life than Albertans. Recent statistics showed that nearly 50% of Canadians have no savings and that a further 25% will have difficulties with covering an emergency cost of $500. At some point I read somewhere that ~12-14% of mortgages in Canada have been deferred during the pandemic, which supports the idea that Canadians have little in savings. 12-14% is the equivalent of 1 in 7.

To those that will argue that home values never go down I will ask them to look up recent examples in the USA, Spain or Ireland. This has also happened in Canada both in Calgary and in Toronto more than 30 years ago. You can make the argument that the lot on which a home is built does not depreciate, however the building itself does amortize and so does the infrastructure in the neighborhood. You don't want to drive on streets that are full of potholes, do you? Communities also change and what might have been a desirable community quickly could become the opposite - i.e. a garbage processing facility built in there. This also applies to cities, provinces and countries. History is no prediction for the future.

What I am saying does not apply to the margins, but rather ~1 st. dev. from the mean.

I can sleep in my car.

But can you drive in your house?

[Tik-Tok]

Equity value of cars vs equity value of house is about 25% for me.

My house isn't fancy, but neither are my vehicles. I just own a few of them outright.